EBA published an opinion following the notification by the French macro-prudential authority, the Haut Conseil de Stabilité Financière (HCSF), of its intention to extend a measure introduced in 2018 on the use of Article 458(9) of the Capital Requirements Regulation (CRR) to safeguard institutions from excessive risk-taking and to prevent the buildup of future vulnerabilities. The measure intends to tighten, for French global or other systemically important institutions, the large-exposure limits applicable to large and highly indebted non-financial corporations resident in France or to groups of connected non-financial corporations assessed to be highly indebted and based in France. Based on the evidence submitted, EBA does not object to the extension of the proposed measure, which will be applied from July 01, 2020 to June 30, 2021.
With the application of this measure, French systemically important institutions will not incur an exposure exceeding 5% of their eligible capital for non-financial corporations or for groups of connected non-financial corporations assessed to be highly indebted. The 5% limit will act as a backstop to safeguard these institutions from excessive risk-taking and to prevent the buildup of future vulnerabilities. In the opinion, which is addressed to the European Council, EC, and the French Authorities, EBA acknowledges that the objective of limiting indebtedness levels of large and already indebted French non-financial corporations is appropriate with a view to promoting financial stability and preventing future systemic shocks to the French and EU economies. EBA encourages the French authorities to closely monitor the developments during the COVID-19 pandemic and to be ready to de-activate the measure promptly if it leads to unintended consequences. In light of this conclusion, EBA does not object to the extended deployment, by the HCSF, of the proposed macro-prudential measure, which will be applied from July 01, 2020 to June 31, 2021.
Keywords: Europe, EU, France, Banking, Large Exposures, Credit Risk, CRR, Basel, HCSF Measure, G-SII, O-SII, EBA
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